2011 July 13 | timiacono.com

Some People Still Think Gold is Money

Here’s the most interesting exchange that I’ve come across so far from this morning’s Humphrey Hawkins testimony by Federal Reserve Chief Ben Bernanke before the House Financial Services Committee – Rep. Ron Paul (R-TX) asks about gold.

What do you thing would have happened if Bernanke had said, “The reason that people own gold is because they’re worried about central banks debasing the paper currency – as you know, it’s not really backed by anything…”

As for the answer to the question “Is gold money?”, it hinges on the “unit of exchange” part of the definition of money which, due to its limited use in commerce today, you’d have to say that gold fails. Then again, U.S. dollars come up short in the “store of value” definition…

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Russian Prime Minister Vladimir Putin seems to have a habit of calling American monetary policy “hooliganism”. He did so again yesterday as detailed in this report at xinhuanet, that is, before Fed Chief Ben Bernanke reiterated today that his printing press fingers are getting a little twitchy. This comes after making the same claim about three months ago when Standard & Poor’s changed their outlook on U.S. debt from stable to negative.

Russian Prime Minister Vladimir Putin criticized the U.S. monetary policy on Monday, calling it “hooliganism,” local media reported.

We, thankfully or not, cannot print a reserve currency. But what are they (the Americans) doing? They simply spit nails, turn on the printing press and throw money to the world, in order to resolve their urgent problems,” Putin told members of the Russian Academy of Science in Moscow.

While exploiting its monopoly on issuing a global reserve currency at full scale, the United States asked Russia to obey a strict financial discipline, he added.

Russia is unlikely to resolve the problems it faces by covering the budget deficit with printing extra money, Putin said.

Of course, he’s really just a little envious. What government wouldn’t want all the rights and privileges that go along with possessing  the world’s reserve currency, such as issuing debt in a currency that everyone must use, forestalling problems for decades?

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Gold Reaches New All-Time High

It looks like it’s going to be another interesting day for precious metals as investors increasingly turn to gold and silver amid escalating troubles with government paper money around the world. Earlier today, the gold price reached a new record high at around $1,578 an ounce and appears to be headed toward $1,600.

After taking out the previous high reached back on May 2nd, there is again no upward resistance for traders to worry about and higher prices are more likely than not. Given the deplorable state of paper money these days, prices might go much higher in short order.

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Wednesday Morning Links

MUST READS
Ireland Debt Rating Cut to Junk – Bloomberg
EC says Ireland downgrade ‘incomprehensible’ – Irish Times
Draghi: New Phase Has Opened in European Debt Crisis – Bloomberg
Bernanke to face grilling on jobs, debt, Europe – Reuters
Fed Weighed More Stimulus—As Well as an Exit Strategy – CNBC
Forget deficit reduction: Here comes more stimulus – CNN/Money
Ben Bernanke Won’t Have to Face Ron Paul Much Longer – The State Column
Obama’s Smorgasbord Is Missing a Few Main Courses – Bloomberg
California State hikes tuition by another 12% – CNN/Money
The Link Between Peak Oil and Peak Debt – The Oil Drum
Is This the Beginning of the End for Euro? – CNBC
Why Taxes Will Rise in the End – NY Times

MARKETS/INVESTING
Oil hovers below $98 as US crude supplies jump – AP
Gold hits record high on euro zone debt fears – Reuters
Don’t Shed A Tear For John Paulson Just Yet – Dealbreaker
Pimco’s Gross Bought Treasuries in June, Pared Cash – Bloomberg
Going long with David Rosenberg – Financial Post
Indian investors jump into gold ETFs – Mineweb
How high can Japan’s yen go? – MarketWatch

ECONOMY/WORLD/HOUSING/BANKING
Report: Cisco may cut 10,000 workers – McClatchy
Most Americans still feel we’re in a recession – MarketWatch
Three Reasons Why the Recovery is a Long Way Off – Fiscal Times
Economic growth in China slows to 9.5% in 2nd Quarter – MarketWatch
Buiter: ECB to Revive Bond-Buying to Protect Italian Auction – Bloomberg
Age of austerity to continue for decades, warns OBR – Guardian
SoCal home prices, sales at 2011 high – O.C. Register
Why the Housing Tax Credit Failed – Wall Street Journal
Blaming Fannie for Crash Gives Banks Free Pass – Bloomberg
DeLong: Fed Needs QE3 to Boost Economic Growth – BusinessWeek
A Divided FOMC – Fed Watch

 
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